Title
F and S Velasco Co., Inc. vs. Madrid
Case
G.R. No. 208844
Decision Date
Nov 10, 2015
FSVCI's ownership dispute arose after Angela's death; Madrid claimed her shares but lacked registration. SC nullified Madrid's meeting, dissolved management committee, and reinstated pre-death Board.

Case Summary (G.R. No. 129899)

Key Dates and Procedural Posture

Important events: FSVCI incorporated June 8, 1987; deaths of Simona and Francisco (1998 and 1999) led to their daughter Angela acquiring majority shares (70.82%); Angela died September 20, 2009; Madrid executed Affidavit of Self‑Adjudication October 8, 2009; Madrid called a Special Stockholders’ and Re‑Organizational Meeting for November 18, 2009 and executed deeds of assignment on November 10, 2009; a separate Emergency Meeting was held November 6, 2009 by the Saturnino group. Litigation: petition filed in RTC (Legazpi), RTC declared both meetings void (March 3, 2010), Court of Appeals modified to validate November 18, 2009 meeting and ordered a management committee (March 1, 2013), CA denial of reconsideration (August 7, 2013), and the case proceeded to the Supreme Court.

Factual Background — Shareholdings and Competing Meetings

As of May 11, 2009, FSVCI had 24,000 shares: Angela 16,998 (70.82%), Madrid 1,000 (4.16%), Scribner 6,000 (25%), Seva and Sunico one share each. After Angela’s death while serving as Board Chairman, Madrid executed an affidavit of self‑adjudication asserting ownership of Angela’s shares and later sought to effect transfers and call a reorganization meeting (November 18, 2009). Prior to that, Seva (corporate secretary) convened an emergency meeting on November 6, 2009 attended by Saturnino, Seva, and Sunico, which recognized Saturnino as a director and elected Saturnino President and Scribner Vice‑President. Both groups held competing actions to assert control.

RTC Ruling and Grounds

The Regional Trial Court (Special Commercial Court) voided both the November 6 and November 18, 2009 meetings. The November 6 meeting was invalidated for lack of quorum (only two directors physically present) and because Scribner could not attend by proxy, plus recognizing Saturnino without formally filling Angela’s vacant directorship would have increased the board beyond the number fixed in the Articles of Incorporation. The November 18 meeting was invalidated because the RTC viewed Madrid’s interest in Angela’s shares as merely equitable until a probate or administration proceeding conclusively transferred title; thus Madrid could not exercise majority rights at that time.

CA Ruling and Grounds for Modification

The Court of Appeals overturned the RTC as to the November 18 meeting, holding that Madrid’s affidavit of self‑adjudication effected ownership of Angela’s shares and that he had complied with registration through the November 18, 2009 General Information Sheet (GIS) filed with the SEC. The CA therefore deemed Madrid the controlling stockholder and validated the reorganization and elections from the November 18 meeting. The CA also ordered the appointment of a management committee due to persistent intra‑corporate conflict, allegations of embezzlement, leadership uncertainty, and alleged imminent danger of dissipation and paralysis of corporate operations.

Supreme Court — Ownership, Registration, and Legal Principle

The Supreme Court emphasized the legal distinction between acquiring ownership inter se and effecting a transfer binding on the corporation. It reiterated that under Section 63 of the Corporation Code, transfers of shares are not effective against the corporation until recorded in the corporate books (the Stock and Transfer Book), and Section 74 requires maintenance of that book as the controlling record of stock ownership. The Court relied on controlling jurisprudence (e.g., Batangas Laguna Tayabas Bus Co., Inc. v. Bitanga and Lao v. Lao) to conclude that inclusion in a General Information Sheet submitted to the SEC is not equivalent to registration in the corporate Stock and Transfer Book and does not by itself confer transferee rights vis‑à‑vis the corporation.

Supreme Court — Application to this Case (Validity of November 18 Meeting)

Although subsequent proceedings in the probate/administration docket (RTC‑Makati and appeals) recognized Madrid as Angela’s sole heir and appointed him special administrator, the Supreme Court found that at the time Madrid called and conducted the November 18, 2009 meeting there was no showing that Angela’s shares had been registered in FSVCI’s Stock and Transfer Book in Madrid’s name. The CA therefore erred in relying on the GIS as proof of registration. Because Madrid’s transfer was not recorded in the corporate books at the time of the meeting, he lacked the registered shareholder standing to call the meeting or to vote sufficient shares to effect the corporate reorganization; consequently the November 18, 2009 meeting and the acts taken therein were null and void.

Board Composition and Remedial Order Regarding Directors

Given the nullity of both the November 6 and November 18, 2009 meetings (the RTC’s voiding of the November 6 meeting having attained finality), the Supreme Court ordered reconstitution of the Board of Directors as it stood immediately prior to Angela’s death. The remaining directors (Madrid, Seva, Scribner, and Sunico) were to resume their corporate positions and to fill the vacancy caused by Angela’s death in accordance with Section 29 of the Corporation Code. The reconstituted board would s

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